Frontier Communications 2009 Annual Report Download - page 100

(21) Commitments and Contingencies:
On June 24, 2004, one of our subsidiaries, Frontier Subsidiary Telco, Inc., received a “Notice of Indemnity
Claim” from Citibank, N.A., that was related to a case pending against Citibank and others in the U.S.
Bankruptcy Court for the Southern District of New York as part of the Global Crossing bankruptcy proceeding.
The case against Citibank and others has been settled with no contribution from the Company and no further
indemnification claims are expected.
We are party to various other legal proceedings arising in the normal course of our business. The outcome
of individual matters is not predictable. However, we believe that the ultimate resolution of all such matters,
after considering insurance coverage, will not have a material adverse effect on our financial position, results of
operations, or our cash flows.
We anticipate capital expenditures related to our currently owned properties of approximately $220.0
million to $240.0 million for 2010. Although we from time to time make short-term purchasing commitments
to vendors with respect to these expenditures, we generally do not enter into firm, written contracts for such
activities.
In connection with the Verizon Transaction, the Company has commenced activities to obtain the
necessary regulatory approvals, plan and implement systems conversions and other initiatives necessary to
effectuate the closing, which is expected to occur during the second quarter of 2010, and enable the Company
to implement its “go to market” strategy at closing. While the Company continues to evaluate certain other
expenses, the Company currently expects to incur operating expenses and capital expenditures of approximately
$100.0 million and $75.0 million, respectively, in 2010 related to these integration initiatives. The Company
incurred $28.3 million of acquisition and integration costs and $25.0 million in capital expenditures related to
the integration of Verizon activities during 2009.
We conduct certain of our operations in leased premises and also lease certain equipment and other assets
pursuant to operating leases. The lease arrangements have terms ranging from 1 to 99 years and several contain
rent escalation clauses providing for increases in monthly rent at specific intervals. When rent escalation
clauses exist, we record annual rental expense based on the total expected rent payments on a straight-line basis
over the lease term. Certain leases also have renewal options. Renewal options that are reasonably assured are
included in determining the lease term. Future minimum rental commitments for all long-term noncancelable
operating leases as of December 31, 2009 are as follows:
($ in thousands)
Operating
Leases
Year ending December 31:
2010 . . . ................................................ $24,417
2011 . . . ................................................ 11,627
2012 . . . ................................................ 8,407
2013 . . . ................................................ 7,107
2014 . . . ................................................ 5,796
Thereafter ................................................ 6,934
Total minimum lease payments .......................... $64,288
Total rental expense included in our consolidated statements of operations for the years ended
December 31, 2009, 2008 and 2007 was $25.9 million, $24.3 million and $23.6 million, respectively.
We are a party to contracts with several unrelated long distance carriers. The contracts provide fees based
on traffic they carry for us subject to minimum monthly fees.
F-38
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements